Re: st: Interacting dummies and multicollinearity issue

["Özlen D. Luznar" <ozlend1@umbc.edu>]

Maarten- thank you so much. This helps a lot actually.  I appreciate your
time.

Ozlen
> --- On Wed, 23/6/10, Özlen D. Luznar wrote:
>> variable d - has 3 values - dummied out to d1 d2 d3
>> variable e has 4 values dummied out to e1 e2 e3 e4
>>
>> In addition to include d1 d2 e1 e2 e3 in my model I want to
>> include interaction terms between d dummies and e dummies:
>>
>> 12 possible variables interaction between d dummies and e
>> dummies.  I am confused as to which of these 12 I can/should
>> include in the model so as to avoide multicollinearity.
>
> Martin correctly pointed out -help fvvarlist-. If you have
> Stata 11, you should definately use the factor variable
> notation.
>
> You can also do it manually. All you need to do is leave
> for each variable one dummie out, and create product terms
> for the remaining dummies.
>
> The real problem is the interpretation. The best solution
> is to use the factor variable notation in combination with
> -margins-. If you don't have Stata 11, then these
> interpretations usually get so messy that the best way
> forward is to find multiple big sheets of paper and do the
> math.
>
> Hope this helps,
> Maarten
>
> --------------------------
> Maarten L. Buis
> Institut fuer Soziologie
> Universitaet Tuebingen
> Wilhelmstrasse 36
> 72074 Tuebingen
> Germany
>
> http://www.maartenbuis.nl
> --------------------------
>
>
>
>
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>


-- 
Özlen D. Luznar

PhD Candidate - Public Policy
Graduate Research Assistant
University of Maryland Baltimore County (UMBC)
1000 Hilltop Circle
Baltimore, MD 21250

443-846-5010

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